Client refusing invoices before the end of each month

Question

I've found myself in an odd situation with a longstanding client that I personally don't have a precedent for, and I can't find one online either.

I have been a contractor for a company in the UK for a number of years. Recently however, they have decided that all jobs in a given month should be collated into a single invoice delivered at the end of each month.

Each job has its own contract. I realise that in the short term I have agreed to this new system, however I had already allocated time for the jobs, and it seemed preferable to just do the work, rather than search for other clients during that period.

Under the new system, the payment for a job completed at the beginning of the month could potentially not come through for at least 60 days, and that's before any accounting problems.

There was no communication before implementing this change, and they are now refusing to accept (i.e., won't even read) invoices before a given date each month. Is this something that anyone has come across before?

I can see why this could be a preferable set-up for this client, but it feels like something about this isn't correct. Although I doubt it's illegal, I can't find any sources online about a similar situation. I'd prefer not to drop them as a client, but the lack of discussion feels like it was a decision taken in bad faith, so it is an option. I'm going to discuss it with my point of contact, but I currently feel under-informed.

Any advice on how to handle a situation like this?

Answer 1

You pretty much know your choices, given that they do not appear willing to negotiate about this.

1. Suck it up and deal with it.
2. Drop them as a client.

While I've not had this specific issue, I've had clients who have their own peculiarities as far as billing goes and sometimes they were a real pain. I've had a couple I did have to drop because they wanted to go a longer term than I was willing and/or were intentionally and habitually going beyond our agreed terms (Net 10, 15 or 30).

What I would do if I were in your place (and could financially take it) is continue with it for the time being but keep them under a tight leash. Don't let them go over at all without contacting them and at the first hint of delays, stop your work until payment is received. I fear if you don't, they'll take advantage of you.

All of this is only even possible because you already agreed with it. The real time to discuss it would have been when they laid it on you and you could have put your foot down or perhaps negotiated something better. Some relationships though become more of a hassle than their worth and I expect that this will become one.

Answer 2

Never let clients dictate payment terms to you. I have had just about everything tried on me. My response has lost me some clients, but they almost always come back and I charge a higher rate when they do.

Basically you just upfront inform them you're not satisfied with payments and it's changing to whatever you decide. Warn them when they don't comply and then stop work until you're paid and they get over themselves. I've done this with the biggest companies in my country and come out better off. The second time I have issues I make them prepay.

You have to be very competent at your job to pull this off, but it's a bad idea to let them have any sort of leverage over you, it weakens your current and future negotiating power.

Answer 3

I live in the US, so maybe things are different here. But I think every client I've ever had works this way. It's quite routine.

I presume they don't pay the invoice the day they get it, I think it's fairly typical for companies to take a month to pay. So from when you do the work to when you get paid is likely 2 months, maybe 3.

For a freelancer or small company, yes, this can be painful. But it's common business practice. As long as they pay eventually, it's not costing you much. You just have to figure out a way to get by until the checks start coming in.

I read an article on consulting once where the author said that when people ask him what they need to do to start a consulting business, they are often surprised when the first thing he says is not anything about evaluating their technical skills or learning business management, but that they need to put aside enough cash so that they can pay the bills and keep up appearances for at least 3 months. Because even if you have a contract lined up for the first day after you quit your paying job, it will likely be 3 months before you see any income.

Answer 4

I'm assuming there aren't any specified payment terms in your contracts already? I'm which case ultimately when you're freely entering into any contract it is a negotiation between parties, and your leverage over the terms of the contract (including payment terms) will depend on your value to them.

If you have in-demand skills which they will find difficult to replace, then you can probably set the terms to a large extent. You could, for example, escalate it to your business contact rather than the finance contact and raise the issue anywhere on the spectrum from "this makes things difficult for me" to "I can't accept any more contracts with those payment terms". If you're valuable to them then they will apply pressure internally (and again the success will depend on a comparison the business will conduct internally between the value of their invoice policy and the value of you as a contractor). You can also include payment terms in your contracts in future - in that case if they violate them by delaying payment then it actually is illegal.

If you are one of many similar freelancers who can do your job and you could be easily replaced then your options are probably limited I'm afraid - unfortunately if you kick up a fuss they may simply replace you.